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On Wednesday, June 10th, at its regular policy meeting, the Bank of Canada (BoC) maintained its target for the overnight rate at 2.25 per cent. This is the 5th pause in a row for the BoC after 2 rate drops last fall. With most banks and mortgage lenders, this leaves their consumer prime rates at 4.45 per cent (4.6 per cent with TD Canada Trust).

Why did the Bank of Canada hold the policy rate?

The latest Consumer Price Index (CPI) report showed that inflation increased to 2.8 per cent in April, mostly driven by the surge in oil prices causing all energy costs to increase. However, the price increases still seem transitory and contained to the energy category, not yet showing a knock-on effect into other categories like home building or durable goods.

As for our economy, the revised numbers for Q1 indicated that our Gross Domestic Product (GDP) shrank by 0.1 per cent, which technically puts Canada in a recession with two consecutive quarters of negative GDP. Employment numbers have been a bit volatile so far this year, but overall things are little changed from where we were in January. The unemployment rate as of May was 6.6 per cent.

With our GDP and employment numbers weak, this further mitigates any risk of inflation becoming more broad based and entrenched. Therefore, the BoC doesn’t need to immediately act with a policy rate increase to fight inflation and can instead afford to take a ‘wait and see’ approach.

What’s next for the policy rate?

In its press release, the BoC clearly stated that nothing is clear about the future, and warned that the policy rate could go up, go down or stay steady for the remainder of 2026.

In the Middle East, the ongoing conflict has pushed oil prices up higher than they’ve been in years, and high oil prices lead to immediately higher costs for energy, with transportation and groceries prices following pretty quickly thereafter. However, sustained high oil prices will eventually seep through the supply chains and push up the prices of almost all other goods and services. So if the conflict continues, the BoC says it’s ready to raise the policy rate to fight inflation regardless of how our economy is otherwise doing.

Closer to home, we also have an ongoing trade negotiation situation with the United States that is clouded with uncertainty, and if that doesn’t resolve soon it will have a significant negative impact on our economy. So if the Middle East situation resolves soon but the trade negotiations stall out and our economy goes further into recession, the BoC is ready to cut the policy rate to help stimulate the economy and prevent deflation and stagnation.

Of course, both of these outcomes aren’t mutually exclusive, and in a worst case scenario we could experience ongoing Middle East conflict and high oil prices as well as trade disruptions with the US and prolonged economic recession here at home. Depending on how those conflicting factors impact inflation, the BoC could end up having its hands tied and be forced to keep the policy rate steady despite recession.

The next scheduled BoC rate announcement is July 15th, 2026.

What does this mean for you and your mortgage?

This rate hold reinforces a “wait and see” environment, but it’s not a time to be passive, especially if you have an upcoming renewal.

If you have a variable rate mortgage:

  • Your prime-based rate will remain unchanged. Enjoy the stability for now, but be aware that economists are starting to predict a strong chance that the policy rate will slowly go up through 2027 and 2028. This is a good time to be setting some extra money aside to prepare for higher mortgage payments in the future.

If you have an upcoming mortgage renewal in 2026:

  • This stable environment is a critical time to plan. While the BoC is holding its policy rate steady for now, the long-term bond markets (which dictate fixed mortgage rates) are always adjusting based on future expectations and fixed rates are likely increasing slowly over the rest of 2026.
  • The Best Move: Do not wait until you are close to your renewal date to start investigating options, as you may miss out on short windows of time when fixed rates drop. Instead, get in touch with us now to begin planning for your 2026 renewal. We can watch the rates for you and determine the best time to renew, and also analyze the various products available and help you determine whether a short-term fixed rate or an adjustable rate might be the best option to navigate the current uncertainty and position you for success in your next mortgage term.

Have questions?

We are always happy to discuss your financing needs!

Please book an appointment today with one of our broker team to discuss your plans and we’ll make sure you have all the information you need to make the best financial decision and get the best mortgage to reach your goals.

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